German Law Journal

[Vol. 11 No. 02

provide an argument for reforming German codetermination and for limiting the size of the supervisory board. Following, the remain of the paper will support the idea of allowing enterprises to choose between a one‐tier and a two‐tier board system.

G. An Argument for Reforming German Codetermination

When the German laws of codetermination were enacted, there were several theories on the legitimacy of active participation of employees in the decision‐making process of the company, such as moral approaches, democracy‐theoretical approaches, sociopolitical approaches and sociophilosophical approaches.139 Today, these theories are antiquated. Nevertheless, codetermination has had a beneficial impact on the workers’ conditions and industrial morale after World War II141, and today is still a primary structure characteristic of German corporate governance. Nowadays, German codetermination is still favored because it may improve the flow of information from the workforce to the management, and it may facilitate the participation of employees in the decision‐making process inside the large firm that may have positive effects on the motivation of the workforce and may lead to more social peace142. The crucial point is the flow of information that goes either way. Firm‐specific knowledge and expertise of employees maybottom upimprove the decision‐making process of the supervisory board. The satisfaction and motivation of the workforce is said to be improved by the information flowtop downfrom the supervisory board to the employees, especially if the point is lay‐offs or other measures that put pressure on the workforce. 140